Full Breakdown
EY Warns UK Recession Risk if Strait of Hormuz Remains Closed
8/3/2026, 12:37:55 PM
EY Forecast Links Strait Closure to UK Economic Outlook
On August 3, EY’s UK chief economist Peter Arnold warned that a prolonged shutdown of the Strait of Hormuz could push Britain into recession. EY projects GDP growth of 0.5 % in 2024, slipping to a 0.2 % contraction in 2027 if the strait stays closed beyond mid-2027. The firm estimates that reopening the waterway by the end of September would raise the 2024 growth forecast to 0.9 % and lift 2027 growth to 1.2 %.
Inflation and Monetary Projections
EY attributes a potential surge in UK inflation to higher oil and gas prices stemming from the strait’s closure. Under its worst-case scenario, inflation could climb from the current 2.8 % to 6.4 % by year-end. The Bank of England, meanwhile, expects consumer-price inflation—recorded at 2.6 % in June—to peak around 3.2 % later this year before gradually returning to its 2 % target. Interest rates are projected to stay at 3.75 % through the remainder of the year, with two cuts anticipated in 2027.
Official Statements & Responses
The Bank of England signaled readiness to adjust policy if inflation spikes sharply due to the Iran-related shipping disruption.
Political Context and Diplomatic Efforts
U.S. President Donald Trump announced that talks with Iran would resume on Monday, aiming to secure the “immediate, complete and total” reopening of the strait. Trump declined to set a deadline for an agreement, emphasizing a desire to avoid further loss of life.
Verbatim Quotes
- “I'm not looking to kill people because people die, a lot of people die, and we don't want that," Mr Trump said in response.” — Mr Trump, US president
